A £1bn hedge fund run by Peloton Partners has collapsed and a second fund, worth £800m, is in doubt as the company sells off its assets.

Peloton co-founder Ron Beller last week wrote to investors saying he "deeply regretted" the situation.

Former Goldman Sachs executive Mr Beller and his wife were victims of a £1.1m theft carried out by his secretary, Joyti De-Laurey, in 2004.

Mr Beller, a wealthy man, did not notice the theft for two years.

"We are working night and day exploring every feasible option to alleviate the situation," Peloton founders Ron Beller and Geoffrey Grant told investors last week.

The firm's main ABS Master Fund delivered an 87% growth rate to investors in 2007, but the credit crisis means it cannot meet interest payments on the loans it took out to buy its assets.

It must now sell off its assets, leaving investors facing large losses.

Peloton's remaining £800m Multi-Strategy Fund has about 40% of its assets invested in the first, and has been seriously impacted by its problems.

Mr Buller reportedly told investors on Wednesday he did know how much is remaining in the smaller fund.

Tightening terms

Peloton's founders have said publicity about their problems has made the situation worse.

"Credit providers have been severely tightening terms without regard to the creditworthiness or track record of individual firms, which has compounded our difficulties and make it impossible to meet margin calls," Peloton said.

The founders may have to take substantial personal losses after investing their own money in the funds.

Ron Beller was thrust into the spotlight in 2004 when he gave evidence against his former secretary, who was convicted of stealing £4.5m from him, his wife, and other former senior Goldman Sachs staff.

Joyti De-Laurey used the money to fund a lavish lifestyle, buying a luxury car, a holiday villa and expensive jewellery.

During the trial, Mr Beller admitted he had spent £86,000 on personal travel in a year, as well as more than £17,000 on wine.

Their story was made into a BBC drama, screened in 2005. Mr Beller was played by Canadian-born actor Nigel Whitmey, while Meera Syal played De-Laurey.